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Are you investment ready?

“Understanding how to be a good investor makes you a better business manager and
vice versa.” Charlie Munger

“Many of the biggest and most far-reaching investments we make in our lives are
investments that have little or nothing to do with money.” Daniel Quinn

The big idea

Investment readiness means that you are in a strong position to present your
business to different investors and meet their requirements. You may have a
particular project to put forward or you may feel that your business is ready for rapid
growth. On this basis you might consider approaching different sources of funding,
such as:

• Business angels
• Venture capitalists
• Banks
• Other funders such as high net worth individuals

Purpose
Seeking external support to allow your business to grow involves both ensuring you
have a credible case to present and making a series of personal decisions to make
sure you are comfortable with the direction you are taking the business in. The
purpose of this tool is to help you think about some of the issues that might arise
during this process so you are more likely to meet the needs of the investors and to
succeed.

You are unlikely to be investment ready if:

• You are unwilling to give up a stake in the business

• You have an inadequate business plan

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• You are not looking for fast growth. Can you provide a growth level of eight to ten
times within five years?
• You do not have a proven need for your product or services
• You lack knowledge of your market
• You lack knowledge of the investment process
• You are unable to pitch your business effectively or credibly

The tool
This tool consists of a questionnaire that takes you through some of the key
questions you need to consider to work towards investment readiness. To use the
tool take the following steps:

1. Complete the following questionnaire

2. Ensure you have evidence to support your answers
3. Record any issues or further questions that arise as you complete the
questionnaire
4. If you decide not to proceed with seeking external funding, consider what that
means for the future of your business. Is this a final decision or will you revisit it at
a later date?
5. If you decide to proceed, consider:
a. Any actions you need to take to improve your investment readiness
b. Are you looking for national or international growth?
c. What further advice you might seek to prepare your case
d. Whether you need training in this area

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Yes No

The market

Are you operating in a high growth industry/sector?

Do you have a first-to-market advantage?

Do you have innovative products or services?

Do you have a unique selling proposition?

Is there a global market for your products or services?

Is there clear evidence of a market need for your products or services?

Have you undertaken any formal market research?

Do you have both primary and secondary sources of information about the
market?

Are you able to list all your potential domestic and/or international market
segments?

Do you have a clear indication of the market size?

Have you completed a competitor analysis?

Your business

Do you have a comprehensive business plan?

Have you identified your strengths and weaknesses? And how you intend
to deal with them?

Do you own your intellectual property? Have you protected your

intellectual property and can you show a strategy for protecting future
developments?

Is the legal structure of your company clear and appropriate?

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Yes No

Is the company compliant with current legislation and regulatory

requirements?

Are you able to supply a copy of your company registration documents?

Is there a shareholder’s agreement?

Are you facing any litigation – current, pending or potential?

Does the business have appropriate insurance coverage?

Your finances

Have you identified the level of funding required?

Have you identified the type of funding required? (business angel or

venture capital etc)

Are you able to supply audited accounts?

Are you able to supply projected operational and financial statements?

Are you able to supply projected earnings and cashflow forecasts?

Are you able to provide details of types of shares and share distributions
to potential investors?

Are the business’ accounting policies in accordance with accounting

standards?

Are your personal and business affairs clearly separated in the operation
of the business?

Are the director’s credit cards or holidays funded by the business?

Your people

Do you have an effective management team (where one exists)?

Do the people involved in your business have a diverse range of skills?

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Yes No

Where you are working on your own or with a small team, do you have
access to a wider range of advisers and skills?

Are the shareholders realistic about the business’ market value?

Are current employee contracts in place for all staff (where appropriate)?

Does the business have a properly constituted board that meets at regular
intervals?

Your business case

Are you able to clearly demonstrate the opportunity you are intending to
address?

Have you clearly identified the level of benefits arising from the
opportunity?

Have you undertaken a risk analysis?

Do you have realistic cost projections?

About you

Do you understand the investment process – timescales, due diligence,

legal requirements, key documents, handling investor requirements etc?

Are you ready to accept equity?

Can you clearly identify the characteristics of your ideal investor?

Have you perfected your pitches/presentations to investors?

Are you ready to undergo the due diligence process?

Are you ready to work with new stakeholders?

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Take the next step
How does it feel to think about your business growing in this way? Do you know of
other people who have followed a similar path, consider approaching them to learn
more about their experiences. Which aspect of this process concerns you most?
Which aspect excites you the most?

Top tips
• Practise, practise, practise – work through your pitch and presentation
• Get support. There is a range of small business advisers, like Social Innovator,
UnLtd Advantage and Business Link to name a few, who can help you prepare
your case
• Be realistic about your business model
• Be honest about whether this form of funding is really for you